Maxim Group is preparing to bring its first CDO to the market following the departure several months ago of its CDO group head Wing Chau. Maxim shelved its CDO group, Maxim Advisory, after Chau and several key staff members left. Now, under the name Maxim Capital Management, and with former Bear Stearns managing director Doug Jones at its head as president and chief investment officer, the team is preparing to emerge again as a regular CDO manager.
"We are going to start in the high-grade, then expand from there," Jones said. "Beyond that, we fully envision long-term adding additional product lines, such as CRE or CLO, if and when we find the right talent."
Maxim retained Brian Field, one of the senior structurers and managers at Maxim Advisory - and the group's principal buyer of CDO assets, as well as Justin Rabinowitz, who works in surveillance. A.J. Pliniom transferred from Maxim's structured products trading desk to work with the team. Maxim veteran Armand Pastine is now chief operating officer of Maxim Capital, along with head of Maxim's fixed income group. Pastine said the group is "looking to make strategic hires in the next three-to-six months in order to fully round out the staff."
Chau left Maxim this summer to start up CDO manager Harding Advisory, which has since managed a handful of CDOs. Deals formerly originated under Chau - the high-grade Jupiter series and mezzanine Lexington Capital - remain under Chau's management. Maxim plans to continue its long-standing underwriting relationship with Merrill Lynch.
Maxim hired Pastine from Williams Capital along with Rocco Capoccia and Brad Young in January of 2004, to start an institutional fixed-income group. Pastine is bullish on the long-term viability of the U.S. housing market. He said demand from investors for CDO product backed by real estate is "as strong as its ever been," despite predictions of a drop-off in home prices.
And while a portion of market participants point to CDO buying as one of the key reasons home equity ABS spreads have remained tight despite deteriorating credit fundamentals, managers such as Pastine say the CDO market is not as vulnerable as it was several years ago - when diversification took on a different meaning. "These homogenous, highly correlated deals have performed a lot better because people sitting in the seat have a much higher grasp on the characteristics of these deals," Pastine said.
"I think people are hoping and praying that the market will fall on its head a little bit," Pastine said, "It is wishful thinking that this market is just going to crater."
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